2021 (7) TMI 42 - AT - Income Tax

Reopening of assessment u/s 147 - as per AO assessee has purchased insurance policy and surrendered the policy within 03 years but in the body of the assessment order, the A.O. has not made any such addition on account of the surrendered insurance policy - HELD THAT - It is an admitted fact that the A.O. has not made any addition on account of the reasons for which the case of the assessee was reopened but has made certain other additions. We find the Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd., 2011 (6) TMI 4 - DELHI HIGH COURT has held that the A.O. had jurisdiction to re-assess the issues other than the issues in respect of which proceedings are initiated, but, he was not so justified when the reasons for the initiation of those proceedings ceased to survive. Since, in the instant case, admittedly no addition has been made on account of the issue for which the case of the assessee was reopened but addition has been made on some other ground without issuing fresh notice under section 148 after recording reasons under section 147 for escapement of income, therefore, the addition made by the A.O does not survive being not in accordance with Law. The Order of the Ld. CIT(A) is accordingly set aside, and the A.O. is directed to delete the addition - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the reopening of assessment under section 147/148 of the Income Tax Act.
2. Legality of the addition of ?3 crores made by the Assessing Officer (A.O.) on grounds other than the reason for which the assessment was reopened.

Detailed Analysis:

1. Validity of the Reopening of Assessment:

The appeal was filed against the order dated 22.03.2017 by the CIT(A)-1, Gurgaon, for the A.Y. 2008-2009. The assessee, an individual, had initially filed a return declaring an income of ?12,78,494/-. The assessment was reopened based on information from the Deputy Director of Income Tax (Inv.), indicating that the assessee had purchased and surrendered an insurance policy worth ?1.68 crores within three years. The A.O. issued a notice under section 148 of the I.T. Act, 1961, and the assessee responded by treating the original return as filed in response to the notice.

The A.O. issued statutory notices and, upon verification, found that the transactions related to the insurance policy were explained and no adverse inference was drawn. However, the A.O. noted unexplained entries amounting to ?6,60,93,750/- in the assessee’s bank account, leading to an addition of ?3 crores to the total income of the assessee.

2. Legality of the Addition of ?3 Crores:

The CIT(A) sustained the addition made by the A.O., observing that the assessee had received ?6,60,93,750/- related to a property transaction dispute and had only paid ?3,60,93,750/- to M/s. Vikram Electrical Equipment Pvt. Ltd., with the remaining ?3 crores still lying with the assessee. The assessee contended that the remaining amount was paid on behalf of M/s. Vikram Electrical Equipment Pvt. Ltd., but could not provide supporting evidence. Consequently, the CIT(A) concluded that the ?3 crores were received by the assessee for his role in resolving the property dispute and confirmed the addition.

Tribunal’s Findings:

The assessee argued that the A.O. could not make an addition on grounds other than the reason for which the assessment was reopened without issuing a fresh notice under section 148. The Tribunal agreed, referencing the Hon'ble Delhi High Court's decision in Ranbaxy Laboratories Ltd. vs. CIT, which held that if the A.O. does not make an addition for the reason the case was reopened, he cannot make any other addition without issuing a fresh notice under section 148.

The Tribunal found merit in the assessee's argument, noting that the A.O. had not made any addition related to the surrendered insurance policy, the original reason for reopening the assessment. Thus, the Tribunal concluded that the addition of ?3 crores was not in accordance with the law as it was made without issuing a fresh notice under section 148. Consequently, the Tribunal set aside the order of the CIT(A) and directed the A.O. to delete the addition.

Conclusion:

The appeal was allowed, and the addition of ?3 crores was deleted. The Tribunal did not adjudicate other grounds challenging the addition on merits and the validity of the reassessment proceedings due to the success of the primary legal ground. The order was pronounced in the open court on 24.06.2021.